Embraer Releases Third Quarter 2008 Results in U.S. GAAP

SAO JOSE DOS CAMPOS, Brazil, Nov. 3 /PRNewswire-FirstCall/ --

The Company's operating and financial information is presented, except where otherwise stated, on a consolidated basis in United States dollars (US$) and in accordance with US GAAP. The financial data presented in this document for the quarters ended September 30, 2007, June 30, 2008 and September 30, 2008, are derived from the unaudited financial statements. In order to better understand the Company's operating performance, additional information is also presented at the end of this release, in accordance with accounting practices adopted in Brazil ("Brazilian GAAP")

Embraer (BOVESPA: EMBR3; NYSE: ERJ), the world's leading manufacturer of commercial jets with up to 120 seats, recorded third quarter 2008 (3Q08) net sales of US$ 1,546.0 million and net income of US$ 57.7 million, equivalent to diluted earnings per ADS of US$ 0.3190.

By the end of September 2008, the volatility of the Brazilian currency directly impacted Embraer's net results. The Company's policy to mitigate its exposure to currency variations is based on the balance between assets and liabilities indexed in foreign currency and on the daily management of its currency trading, since most of its revenues are denominated in dollars and possibly could act as a natural hedge for the Company. The trend of appreciation of the U.S.dollar against the real might cause losses in the Company's derivative instruments, but those losses tend to be compensated with an increase in operating revenues, since part of Embraer's costs are denominated in reais.

Embraer holds derivative positions, mostly Non-Deliverable Forward ("NDF"), to hedge its exposure to the Brazilian currency. Those instruments do not have any speculative component and serve exclusively to protect the Company's operations against a potential loss arising from adverse changes in currency exchange rates.

At September 30, 2008, Embraer's "NDF" positions totaled R$ 1,675.0 million (approximately US$ 875 million), with different maturity dates, as shown below:

              Deri-                                      Accounting Accounting
             vative                    Notional  Average Provision  Provision
             Instru- Original Current  (in R$   Maturity     at         at
              ment   Currency Currency thousand)  Rate   09.30.2008 09.30.2008
    Maturity
     up to
     12/30/2008                          574,290  1.7572   (53,268)   (53,268)
    Maturity
     up to
     03/31/2009 "NDF"   US$      R$    1,005,008  1.7254  (122,504)  (122,504)
    Maturity
     up to
     06/30/2009                           97,715  1.9000    (5,011)    (5,011)
    TOTAL                              1,675,013       -  (180,783)  (180,783)
                                                                   Gain (loss)

The exchange rate used to mark the Company's "NDF" positions was R$ 1.9143 per U.S. 1.00 and the table below shows Embraer's foreign exchange gains and losses in each period and also its gains and losses in derivative positions:

    US$ million
                                           1Q08      2Q08      3Q08      9M08

    Gain (loss) on derivatives(*)           9.6      55.6     (92.9)    (27.7)
    Foreign exchange gains (losses), net   (4.1)    (32.3)     58.7      22.2
    TOTAL                                   5.5      23.3     (34.2)     (5.5)

    (*) Included in net financial income (expenses) line of the Statement of
        Income

The balance between assets and liabilities is constantly monitored by the Company, as well as our investments in other currencies, but due to the strong volatility, when we analyze those numbers in the short term, big variations can be noted, and when we analyze the accumulated amount for the year, the numbers are in accordance with the operations of the Company.

Embraer delivered 48 aircraft during 3Q08, compared to 47 in the third quarter of 2007 (3Q07) and 52 aircraft in 2Q08, totaling 145 jets delivered in by September 30, 2008. Embraer reaffirms its estimate of delivering 195 to 200 jets in 2008, tending toward the higher figure, as well as ten to 15 Phenom 100 jets. Embraer's firm order backlog on September 30, 2008, reached a record high of US$ 21.6 billion, including sales to the Executive Aviation market, which backlog is approximately US$ 7.0 billion. The EMBRAER 170/190 jet family backlog accumulated a total of 865 firm orders and 813 options.

Net revenues for 3Q08 totaled US$ 1,546.0 million, an 8.2% increase over the US$ 1,428.5 million in net revenues for 3Q07, basically due to the higher number of aircraft deliveries and a more favorable product mix.

The gross margin for 3Q08 totaled 21.7%, representing an increase over the 21.2% in 3Q07 gross margin in despite the impact of the 13.0% decrease in the average exchange rate (R$/US$) on the portion of the Company's cost stated in reais, and the average increase of 10.13% in the payroll. The higher gross margin is due to productivity gains achieved since the improvement of the Company's industrial processes that started in mid-2007. The gross margin for 3Q08 is in line with the 21.9% for 2Q08.

Income from operations reached US$ 100.5 million in 3Q08, representing a decrease from the US$ 162.2 million recorded for the same period in 2007. The operating margin was 6.5% in 3Q08, representing a decrease from the 11.4% for 3Q07 and also a decrease from the operating margin of 6.9% for 2Q08.

Net income totaled US$ 57.7 million in 3Q08, compared to US$ 194.9 million in 3Q07 and US$ 134.4 million in 2Q08. The net margin decreased to 3.7% in 3Q08, compared to 13.6% in 3Q07 and 8.2% in 2Q08.

The Company maintained its high level of liquidity, and its net cash position was US$ 491.9 million for the quarter ended September 30, 2008.

    THIRD QUARTER 2008 in perspective

INDIAN GOVERNMENT ACQUIRES THREE EMBRAER EMB 145 AEW&C JETS

Embraer and the Indian Government signed an agreement for three EMB 145 AEW&C (Airborne Early Warning & Control) jets. The contract includes a comprehensive logistics package comprised of training, technical support, spare parts, and ground support equipment.

EMBRAER SELLS FIVE EMBRAER 190 JETS TO CHINA'S KUN PENG AIRLINES

Embraer and Kun Peng Airlines Co., Ltd., one of the main operators in the Chinese regional aviation market, signed a contract for five firm orders for the EMBRAER 190 jet, marking an important expansion of Embraer's presence in mainland China.

EMBRAER AND AEROMEXICO SIGN A CONTRACT FOR 12 EMBRAER 190 JETS

Embraer signed a contract with Aeromexico for 12 EMBRAER 190 jets, as part of the airline's modernization plan. The new aircraft will be flown by its Aeromexico Connect subsidiary, which already operates 28 ERJ 145 jets, and has taken operating leases on an additional four EMBRAER 190 jets from GE Commercial Aviation Services (GECAS), since November 2007.

EMBRAER AND NAS AVIATION CONFIRM FIVE ADDITIONAL EMBRAER 190 JETS

Embraer and Saudi Arabia's National Air Services (NAS) Aviation confirmed options on five additional EMBRAER 190 jets. The original contract, covering five firm orders and five options, was announced in November 2007, during the Dubai Airshow. The airline also retains purchase rights for 12 additional aircraft of the same model.

EMBRAER SELLS FIVE EMBRAER 190 JETS TO NIKI AIRLINE

Embraer and Austria's NIKI Luftfarht GmbH signed a contract for five EMBRAER 190 jets. The agreement includes purchase rights for another five aircraft, which could be either the EMBRAER 190 or the EMBRAER 195.

EMBRAER TO CREATE TWO CENTERS OF EXCELLENCE IN PORTUGAL

In a ceremony held in Lisbon, Embraer announced plans for implementing two new industrial units dedicated to manufacturing complex airframe structures, being one focused on metallic assemblies and the other on composites, both of which to be located in the city of Évora, Portugal.

EMBRAER WILL SUPPLY THE SUPER TUCANO TO THE CHILEAN AIR FORCE

Embraer and the Chilean Air Force (FACH) signed a contract for 12 Super Tucano aircraft. This is a result of a public bid held by the FACH, which chose the airplane manufactured by Embraer as the best solution for the tactical training of its pilots. The first Super Tucano is expected to be delivered in the second half of 2009.

EMBRAER MADE FIRST E-JETS SALE TO MONTENEGRO AIRLINES

Embraer announced the sale of the first EMBRAER 195 jet to Montenegro Airlines. The agreement with the airline from the Republic of Montenegro also includes purchase rights for two more aircraft of the same model.

EMBRAER OPENED TWO NEW EXECUTIVE JETS SERVICE CENTERS IN THE U.S.

Embraer celebrated the opening of its facilities at Phoenix-Mesa Gateway Airport, in Mesa, Arizona, and another hangar at Bradley International Airport, in Windsor Locks, Connecticut. The new facilities are dedicated to full-service care for the Company's Phenom 100, Phenom 300, Legacy 450, Legacy 500 and Legacy 600 executive jets.